When Airlines Should & Shouldn’t Charge For Something

Spirit Airlines Airbus 319-132 N506NK

Image via Wikipedia

Here’s a thought, if more than 75% of passengers purchase an ancillary revenue item, it should be included in the ticket price.

If 75% or more of people on a flight buy a meal — meals should be included in the ticket price.

Airlines should have a threshold in lieu of what seems to be a “what can we charge for” and “how much will we get away with” mentality.

Not all ancillary sources are bad. There are the “good” kind of ancillary revenue like day of departure upgrades and premium seating — which airlines need to focus on — and the “bad” kind like baggage fees, food, etc.

Airlines should get creative on “good” ancillary revenue — ie: up selling and cross selling.

In the mean time, ancillary fees are going up up and up!

There are fees yet to be introduced held up purely because the reservation systems the airlines haven’t been able to keep up with the ways airlines intend on charging passengers. The fees we already pay are going up.

JetBlue‘s executive vice president and CFO, Ed Barnes, told analysts earlier this month that the airline has lost some potential ancillary revenue during the past quarter by waiving certain fees in this year’s transition to Sabre.” – Travel Weekly

Why is ancillary revenue growing? It works!

Ancillary revenue is a significant opportunity for Continental,” he said. “And United has done a very good job. There are many issues related to rolling out our ancillary revenue products. There are IT issues, there are global distribution system issues, there are timing issues in terms of where it is in the chain of purchase, whether it’s a prepurchase or day of departure or post-purchase.” According to Travel Weekly,

When Will All This Stop?

Not anytime soon barring an airline charging for something we really won’t stand for (ie: bathrooms, to charge for sitting down on the plane versus standing up..).

Who’s Bucking the Trend?

Southwest Airlines which maintains no baggage fees.

Are Frequent-Flier Deals a Good Deal? – WSJ.com

British Airways destinations

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Thoughts relating to Are Frequent-Flier Deals a Good Deal? – WSJ.com.

Pretend your mileage is a product that you have to ‘buy’ (earn or purchase bonus miles) and ‘sell’ (redeem for tickets or upgrades).

Cost Price

Travelers who buy frequent-flier miles pay about 3 cents per mile, but then they typically redeem them for tickets at 1.5 cents each—or even less.

Sale Price

Redeeming miles at the right time (there’s actually a seat on a flight you want) and for the right ticket is what’ll determine if you make a ‘profit’ or not.

United believes savvy road warriors, not just infrequent fliers, are taking advantage of the bonus mileage offers. When redeemed for upgrades or for last-minute tickets, miles can deliver more than 3 cents of value apiece, sometimes up to 10 cents a mile or more.

It turns out buying 140,000 miles for $4,139 and redeeming them for an award ticket (you have to pay a fuel surcharge, too, of up to $600) is cheaper than buying a first-class ticket, which starts at more than $12,000 for a Seattle-London round-trip. You buy miles for 3 cents apiece and redeem them for a ticket worth at least 8.6 cents per mile.

You have to do the math.

It turns out buying 140,000 miles for $4,139 and redeeming them for an award ticket (you have to pay a fuel surcharge, too, of up to $600) is cheaper than buying a first-class ticket, which starts at more than $12,000 for a Seattle-London round-trip. You buy miles for 3 cents apiece and redeem them for a ticket worth at least 8.6 cents per mile.

The math works for business-class tickets, though not as dramatically. For Seattle-London tickets, British Airways tickets start at $5,037. Buying 120,000 miles from Alaska costs $3,548. Even after the fuel surcharge, you’ll save more than $1,000.

Alaska offers bonus miles a different way as well: The airline gives customers the chance to pay extra when buying a ticket to add 1,000, 2,500 or 5,000 “Fly and Buy” miles to the mileage earned. Paying for an extra 5,000 miles costs $117 tax included, or 2.3 cents per mile. That’s a discount to outright mileage purchases—buying 5,000 miles separately from a ticket on Alaska costs $148 tax included.


When to Redeem

There’s not magical solution — it’s all very hit or miss.

  • Redeem for Upgrades. On the whole, upgrades have been quite ‘profitable’ for me. Especially from economy plus to business class — British Airways specifically which is nice since I have a credit card that earns BA points.
  • It helps to have  ‘elite status’ or find seats at the last minute.
  • Plan in Advance. I hate telling people that but it’s true.
  • Look for Last Minute Seats
  • Unless it’s an emergency, I shy away from redeeming “anytime” awards.

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